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Avon Chairwoman to Quit Earlier Than Expected

Andrea Jung, who resigned as chief executive of Avon Products late last year, announced on Friday that she would step down as executive chairwoman at the end of the year, further cutting her ties with a beauty products company for which she long served as its glamorous public face.

Ms. Jung’s announcement was somewhat of a surprise because she was working under a two-year contract. She will become a senior adviser after she steps down.

The news pleased several analysts who said Ms. Jung’s diminished role should make it easier for her successor as chief executive, Sherilyn S. McCoy, to execute a much-needed turnaround strategy.

“It’s just one more way that the new management group is trying to close the book on the most recent troubled chapter the company has been living through in the last couple of years,” said Erin Lash, an analyst at Morningstar.

Investors were buoyed by the announcement, too. Shares of Avon climbed 7.21 percent on Friday, closing at $17.39.

In a statement, Ms. Jung, who is 54, said her decision to step down “reflects the successful transition to new leadership.”

“It has been a great privilege to serve the company over the past two decades, most notably the millions of Avon representatives and thousands of associates around the world,” she said.

The new chairman will be Fred Hassan, who is an independent director. Mr. Hassan is a managing director and partner at Warburg Pincus, the private-equity firm.

Ms. Jung’s announcement comes after years of turmoil at the company, which is known for its door-to-door sales force, once known as “Avon ladies.”

Ms. Jung, who was named chief executive in 1999, was credited with injecting energy into a tired brand and pushing Avon into new and potentially lucrative markets overseas, including China and Russia.

Photo

Andrea Jung, shown in September 2010, will step down by the end of the year.Credit
Lucas Jackson/Reuters

But sales slowed in 2005, and several turnaround efforts by Ms. Jung failed to take hold. In addition, Avon became the subject of a Securities and Exchange Commission investigation into potential bribery of foreign officials, which is continuing.

As of the last fiscal year, Avon’s profits had declined every year since 2008.

But Ms. Jung remained popular with the sales force, and her continuing role with the company was in part to ensure its continued loyalty, analysts said.

Ms. McCoy was hired after a long stint at Johnson & Johnson, where she oversaw an overhaul of its pharmaceutical division. Her task at Avon, whose products include Anew cosmetics and Skin So Soft lotion, may be even more challenging.

So far, analysts credit Ms. McCoy for being blunt about the extent of Avon’s problems, for focusing on accountability and for taking her time in devising a strategy for going forward.

“I’ve been encouraged by the tone they have been taking,” said Ms. Lash, of Morningstar, referring to Ms. McCoy and her chief financial officer, Kimberly A. Ross. “They definitely got the point across that they were unhappy with the firm’s results.”

Connie Maneaty, an analyst at BMO Capital Markets, said she was impressed by some of the changes that had already happened at Avon. For instance, she said the company had hired a general counsel, Jeff Benjamin, with 40 years of experience, and a new head of human resources, Scott Crum, to streamline the company’s myriad compensation plans.

“When you have too many plans, the organization isn’t working toward a common goal,” she said.

Avon is trying to settle the bribery case, which Ms. Maneaty said was a positive step forward.

“I like the quality of what I see happening,” Ms. Maneaty said. As for Ms. McCoy’s turnaround strategy, Ms. Maneaty said, “I think it’s really smart of her to not come out with her plan until she knows the depth of her problems and how to fix them.”

“As much as the street wants instantaneous analysis, these things take time,” she said.

Through a spokeswoman, Ms. McCoy declined to comment.

In Avon’s most recent quarterly earnings call in August, however, she was blunt in assessing the challenges ahead of her but suggested that the answer could be fairly basic. Avon’s products and pricing were “off target.” Technology and service “did not keep pace.” Senior managers were moved so often they couldn’t gain traction.

“Avon doesn’t need yet another new strategy,” she said. “We need to focus on the core of Avon’s business: representatives, consumers and our people.”

“The challenge we’re facing didn’t materialize overnight,” Ms. McCoy concluded. “They developed over years, and our solutions will take time as well.”

A version of this article appears in print on October 6, 2012, on page B1 of the New York edition with the headline: Avon Chairwoman to Quit Earlier Than Was Expected. Order Reprints|Today's Paper|Subscribe